Cowboys Owner/GM Jerry Jones stands with WR Miles Austin, whose contract the team front-loaded and manipulated through inflating the signing bonus.

Each Friday, The Legal Blitz features an article from our good friends at Sport-In-Law in an effort to fulfill our promise of providing the best sports law content on the Web. This week’s feature details the salary cap penalty the NFL placed on two of its teams for inappropriately structuring player contracts.

The NFL has issued a statement stating that the Dallas Cowboys and Washington Redskins will receive salary cap penalties for moves they made last offseason. With the collective bargaining agreement (CBA) expiring last year, the NFL effectively had no salary cap. Teams were warned of dumping salaries or front loading contracts, but nothing was mandated in writing.

Restructuring contracts is common practice throughout the league in the offseason. The money is usually given as a large signing bonus so the base salary per year is much smaller. Therefore, the team is able to stay below the cap and the player still receives the money. Without a salary cap in place due to the lockout, teams could dramatically increase players’ salaries for the 2011 season to gain a salary cap advantage. There seemed to be a mutual agreement among owners to not violate the spirit of “competitive” balance and give players huge salaries in 2011. The NFL owners determined the Washington Redskins and Dallas Cowboys created a significant advantage with their transactions in the absence of a salary cap. The owners requested the league take action. The Cowboys have been penalized $10 million and the Redskins $36 million.

The salary cap hit will reduce the money each team can spend over the 2012 and 2013 seasons. The Cowboys and Redskins will be able to spread the penalty across the two years as they see fit. The money will be given to the other teams, excluding the Saints, due to the bounty scandal and the Raiders for violating the unwritten salary cap rules to a lesser extent. The money will come out to $1.6 million of extra cap space the other teams can spend in free agency.

The league recently announced the salary cap for the upcoming season will be $120.6 million. The amount is a slight increase from the previous season. League insiders have indicated the salary cap would have been decreased unless the NFLPA agreed to sanctions against the Cowboys and Redskins. The union did not want the money to be taken from the players, so they advocated for it to be split among the other teams.

Since a salary cap was not in place last year, the Cowboys and Redskins did not commit salary cap violations. The NFL never officially documented the expectations so the Cowboys and Redskins technically did nothing wrong [or so they argue]. Each club has issued a statement contending they followed league rules and regulations. The ruling by the NFL is unprecedented, meaning the appeal procedure is not known at this time. If the league determines an appeal will not be allowed, lawsuits could arise. The clubs might be reluctant to pursue legal action against the league. However, the NFL did approve the moves at the time they occurred. To further complicate matters, it appears other teams (possibly even eight), engaged in the same unfair advantages. It will be interesting to see how the Cowboys and Redskins respond to the penalties. Will they accept the punishment or demand they are reduced- possibly even overturned?

Additional notes: Since this was never in writing, do you think the NFL is justified in its actions? Is splitting the difference between policy-abiding teams the most fair remedy? With no firmly established appeal procedure in place, should the Cowboys/Redskins resort to the courts or seek some other means of relief?

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